Health Study: State Fiscal Problems Warrant Serious Consideration

Posted Jun 23rd, 2008 by Patient Assistance Team

posted Jun 23rd, 2008 by Bryan M. Barletta An April 2008 study by the Kasier Commision on Medicaid and the Uninsured titled “Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses” showed that even slight economic downturns would have a significant effect on the cost of Medicaid and details solutions Congress may take in order to assist in state economic affairs.

The study states that a “one percentage point increase in the national unemployment rate would increase Medicaid and SCHIP [State Children’s Health Insurance Program] enrollment by 1 million and cause the number of uninsured to grow by 1.1 million.” This would cause the cost of Medicaid/SCHIP costs to rise by $3.4 billion, including a $1.4 billion increase in state spending, according to the report.

This increase in the cost of healthcare would only worsen the economic problems many states are facing, the report says. States must borrow money, push spending to the next fiscal year, and other such actions, in order to deal with the cost of health insurance. “All of the latter actions tend to worsen the economic downturn,” says the report.

The report also claims that the 2003-04 federal fiscal relief plan, Jobs and Growth Tax Relief Reconciliation Act, had positive effects. The act, which provided roughly $20 billion in fiscal relief to states, gave a 2.95 percentage point increase (about half that $20 billion) in states paid Medicaid spending.

“The FMAP increase prevented formal Medicaid eligibility cuts and allowed restoration of some previous cutbacks.” But the report also says that this effort was not completely effective. “However, delays in reaching federal agreement meant that many states made large reductions before fiscal relief was available. …a uniform FMAP increase meant that some states got assistance at the wrong time and some obtained less help than they required.”

The Kaiser report details three options Congress may take in order to improve relief for states. The first would be the similar to the FMAP increase. “A second option would be partially targeted,” says the report. States that met a certain criteria would receive an increase in their “Medicaid matching rates,” similar to that detailed in the Economic Recovery in Health Care Act of 2008.

Lastly, states could receive assistance on a staggered, specialized basis. This would use economic conditions to determine “whether a state receives help, the amount a state obtains, and the time period when assistance is furnished.”

The report concludes, “Regardless of how federal policymakers structure assistance, state fiscal problems are emerging that warrant serious consideration as part of an ongoing national strategy to minimize the duration, severity and consequences of economic downturn.”